State gambling regulators have moved to shut down an Elfin Cove fishing derby designed to benefit lodges there, a derby that was offering a grand prize of $100,000.

In Alaska, only nonprofit organizations can operate gambling enterprises, including fishing derbies that require entry fees.

“We have issued them a notice of violation,” said Jeff Prather, supervisor of the Department of Revenue’s Gaming Unit.

“They were a for-profit group that was advertising a fishing derby,” he said.

The Sea King 2012 derby would have cost $400 to enter, offering weekly prizes, as well as a possible $100,000 grand prize, depending on ticket sales.

It was sponsored by several Elfin Cove lodges in an effort to promote the Icy Strait-area businesses, said Donna Forte, with the Elfin Cove Lodge.

“Our hopes as lodges were people would want to be in the tournament, and they’d need lodging, they’d need to rent boats,” she said. “It helps people know about Elfin Cove.”

Other lodges involved in the abortive venture were Fishmasters Inn, Tanaku Lodge and the Cove Lodge, according to the derby website.

Forte said they had hoped to use Juneau’s Moose Lodge as a nonprofit sponsor, but a series of misunderstandings and errors has ended chances of holding the derby.

“The tournament is canceled,” she said.

She blames state officials, however.

“The state’s making us jump through too many hoops,” she said.

One of the biggest of the errors and misunderstandings, she said, was the derby website going live before they had a permit.

Forte said that wasn’t Elfin Cove’s fault. They’d hired a web designer to build a site for them, but he then went live with the site without permission and stopped communicating with them.

The state’s notice of violation was issued May 23, and the site was still up Friday, though it was down by Monday.

Forte said they’d paid a “couple thousands bucks” for the web design, and finally had to get state officials to intercede with the web hosting firm to take the site down.

Forte acknowledged mistakes, but said there was no bad intent.

“We weren’t trying to do anything bad — all the money was for charity,” she said.

She said she hoped the tournament would raise a maximum $200,000 in entry fees, with expenses of about $40,000 and $60,000 left for charity along with the $100,000 payout.

The published contest rules show no guarantee of a payout, however.

According to the derby’s website, its profits were to go to the Southeast Conference, the community of Elfin Cove, and a new scholarship fund for families of commercial fishermen. Forte said that the Moose Lodge was also to get a share.

Forte said she and the other lodges that sponsored the derby believed as long as the proceeds went to a non-profit, everything was OK.

They later found out that it had to be a nonprofit with a gaming license, and which had been around for at least five years.

Moose Lodge Administrator George Damian said they were willing to work with Elfin Cove, but had some initial concerns about the sponsors there.

He said the Moose frequently work with local nonprofits, including Relay for Life, school raffles, and other good causes.

Damian said state officials appeared skeptical of the Elfin Cove effort, and then wanted somebody from the Moose Lodge on site in Elfin Cove during the summer-long derby.

“That just isn’t going to work,” Damian said.

If the lodges get together and start now working for a derby next summer, that might work, he said. They’d probably have to find a local Elfin Cove nonprofit to get a gaming license to make it work.

Now, Forte said they’re out about $14,000 in expenses, including the website and a commercial which has been created but which will now not be aired. No money was collected from entry fees, she said.